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LISA MULLINS: Also in the news today: Europeans are puzzled by a White House proposal to increase taxes on profits made by American companies operating in their countries. President Barack Obama proposed the new tax measure on Monday. It's part of a larger tax reform package designed to raise more money as the US deficit soars. As The World's Gerry Hadden reports, the Europeans think the Obama plan is going to mean short-term gain, but long-term pain.

GERRY HADDEN: US companies make a lot of money in Europe. In Spain, for example, business generated by American firms equals about 8 percent of Spain's GDP. American products are a part of every European's life. Take Apple's iPhone, advertised heavily on Spanish television. What Apple earns selling one is subject to Spanish tax but not to American tax, as long as that profit stays offshore. Mr. Obama's reform eliminates that loophole. If he has his way, all American profits overseas would be taxed at U.S. corporate rates, no matter where the money is held.

PEDRO VIDELA: It's an awful idea. A really bad idea.

HADDEN: Pedro Videla runs the Economics Department at Barcelona's IESE business school. He says applying US tax carte blanche will hobble American competitiveness because the American firms would be taxed twice, in their host country and back home.

VIDELA: When you look at corporate taxes in the United States, when you add up the state taxes and the federal taxes, it is one of the highest of the world. Actually, it is second only to Japan. It's about 35 percent. So in this case, Americans companies, what they'll try to do, they cannot complete with the Chinese making tractors. They won't compete with other Asian firms producing all types of goods. So that will imply that the amount of jobs created will go down, not up.

HADDEN: That's not Mr. Obama's goal. He's trying to accomplish two things: to fill government coffers to fund economic recovery projects, not to mention the wars in Iraq and Afghanistan. And he wants to bring jobs home. Pete Hahn is an economist at the Cass Business School in London. He says this corporate tax reform would in fact create jobs, but not for Americans.

PETE HAHN: If it is applied in the very crude way and U.S. companies do find that they have to withdraw from certain markets it should be an opportunity to increase jobs for other foreign multinational and domestic companies. And I see this happening rather quickly.

HADDEN: Fewer US competitors, more jobs for Europeans, producing everything from toothpaste to laptop computers. On the surface, says economist Pedro Videla, this sounds like a favorable scenario for Europeans. But he says it would actually be bad news for consumers here.

VIDELA: Because the Americans were producing cheaper the product. Now comes a European company to produce it, but at a higher price. Why is this company is producing it now and not an American? Because Americans are over taxed. So us consumers are worse off.

HADDEN: But President Obama's corporate tax overhaul is far from a shoe-in. Republicans and some Democrats in Congress oppose it, and American big business is gearing up to fight it. For The World, I'm Gerry Hadden in Barcelona.

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